Myanmar. Evaluation. Interim Country Partnership Strategy Final Review Validation, CPS Final Review Validation.

Transcription

1 CPS Final Review Validation Myanmar Interim Country Partnership Strategy Final Review Validation, Independent Evaluation

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3 Validation Report February 2016 Myanmar: Interim Country Partnership Strategy Final Review Validation, This document is being disclosed to the public in accordance with ADB s Public Communications Policy Reference Number: FRV: MYA Independent Evaluation: VR-19

4 NOTES (i) (ii) (iii) The fiscal year (FY) of the Government of Myanmar begins on 1 April and ends on 31 March. "FY" before a calendar year denotes the year in which the fiscal year starts, e.g., FY2014 begins on 1 April 2014 and ends on 31 March In this report, $ refers to US dollars. For an explanation of rating descriptions used in ADB evaluation reports, see: ADB Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. March. Manila. Director General Director Team leader Team members V. Thomas, Director General, Independent Evaluation Department (IED) B. Finlayson, Director, Independent Evaluation Division 2, IED N. Subramaniam, Principal Evaluation Specialist, IED N. Gamo, Senior Evaluation Officer, IED I. Garganta, Associate Evaluation Analyst, IED The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area.

5 Abbreviations ADB Asian Development Bank ADF Asian Development Fund ASEAN Association of Southeast Asian Nations CSO civil society organization CDD community driven development COBP country operational business plan CPS country partnership strategy CPSFR country partnership strategy final review EU European Union FY fiscal year FESR Framework for Economic and Social Reforms GMS Greater Mekong Subregion GDP gross domestic product IED Independent Evaluation Department JFPR Japan Fund for Poverty Reduction JCPR Joint Country Portfolio Review MOC Ministry of Construction MOH Ministry of Health NGO nongovernment organization OCR ordinary capital resources OECD Organisation for Economic Cooperation and Development PBL policy-based loan PSOD Private Sector Operations Department PSM public sector management TA technical assistance Currency Equivalents (as of 30 September 2015) Currency Unit Kyat (MK) MK1.00 = $ $1.00 = MK1289

6 Contents Page Acknowledgements Executive Summary vii ix Chapter 1: Background 1 A. Purpose, Scope, and Methodology 1 B. Country Context and Development Plans 2 C. ADB Country Strategies 3 D. Lessons and Issues Identified from Previous Country Evaluations 3 E. ADB s Program and Portfolio Approved during the CPS Period 3 Chapter 2: Assessment of the Country Partnership Strategy Performance 6 A. Relevance 6 B. Effectiveness 10 C. Efficiency 14 D. Sustainability 16 E. Development Impacts 17 F. ADB and Borrower Performance 19 G. Overall Assessment 19 Chapter 3: Key Issues 21 Chapter 4: Quality of the Final Review 24 Appendix Breakdown of Loans, Grants, Nonsovereign Operations, and Technical Assistance, 26 as of September 2015

7 Acknowledgements This validation report was prepared by a team of staff and consultants from the Independent Evaluation Department. The team consisted of Nathan Subramaniam (team leader), Noel Gamo, Irene Garganta, and Gabriele Ferrazzi (consultant). Valuable inputs were also provided by Ben Graham as internal peer reviewer.

8 Executive Summary The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) validated the country partnership strategy final review (CPSFR) prepared by the Southeast Asia Department for Myanmar s interim country partnership strategy for The validation relied on findings from a 1-week field mission to Myanmar in September 2015, document analysis, interviews with relevant ADB staff at ADB headquarters, and feedback from a stakeholder survey. The CPSFR and this validation will contribute to the development of ADB's next country partnership strategy (CPS) for Myanmar for ADB Program ADB reentered Myanmar in 2012 after a long absence, and sought to reengage with the government and stakeholders, establish full resident mission status, normalize the relationship with Myanmar through the clearing of arrears, and establish sufficient knowledge and capacity to prepare a full CPS. ADB aimed to build country capacity to support reforms and the design and implementation of projects. In response to the wide-ranging reforms initiated by the government, ADB adopted a phased approach to reengagement. ADB s diagnostic work provided the basis for preparation of an interim CPS for , which was endorsed by the ADB Board of Directors on 26 October The interim CPS was subsequently extended through Technical assistance (TA) projects with a value of about $37 million were approved during , financed by the ADB TA program, trust funds, and bilateral cofinancing. Development partner cofinancing was secured for three Japan Fund for Poverty Reduction (JFPR) grant projects and 20 TA projects during The ADB TA program comprised 34 projects that sought to build capacity, engage in dialogue regarding support for key reforms in many sectors, and prepare projects. ADB approved $968.6 million in lending and nonlending operations during Assessment The validation reviewed loans, grants, and TA projects that were completed, active and newly approved during To elaborate or clarify issues the validation drew selectively from two planning and strategy documents (the country operations business plans for and , and the extension of the interim CPS to 2016). Because ADB has only recently reengaged with Myanmar, there are few closed projects with completion reports available. Consequently, the validation cannot provide a definitive assessment of outcomes and impacts for most projects. Relevance. The interim CPS provided the framework for ADB s reengagement in Myanmar. It was prepared through a consultative process, and aligned with government policies and plans. It responded to the priorities set under the government's Strategic Framework for Economic and Social Reforms , which stresses economic reforms, human resource development and people-centered approaches, agricultural development, private sector development, and infrastructure. Reflecting these objectives, the interim CPS sought to (i) build human

9 x Myanmar: Interim CPS Final Review Validation, resources and capacity, (ii) promote an enabling economic environment, and (iii) increase access and connectivity. The program was in line with ADB priorities as outlined in Strategy 2020, although the lack of specific sector allocations (and heavy reliance on TA) precluded a full assessment against the core sector composition specified in Strategy The broad-based interim CPS provided ADB and the government with options to develop the country program, and the extensive TA in several subsectors enabled policy reforms and increased capacity in partner agencies. Three loans and three grants were approved in the interim CPS period. The program design reflected the government s requirements. From the start of the reengagement, ADB worked with other development partners and civil society organizations in some of its operations. It successfully pursued cofinancing, and joined ad hoc and formal institutions to coordinate with development partners. The first actual loan to Myanmar, processed in January 2013, was a policy based loan (PBL) for $575.5 million, which helped address arrears and signaled the government s commitment to wide ranging economic reforms. The PBL accounted for about 59% of the portfolio. By the end of the interim CPS period a programmatic focus began to emerge that emphasized ADB s core sectors (i.e., transport, energy, and education). Private sector operations were vigorously pursued, and two operations were approved during The broad set of initiatives initiated early in this period helped build momentum, and broad sector coverage. The validation rates the program relevant. Effectiveness. ADB s program helped Myanmar build human resources and capacity by strengthening institutional arrangements, legal frameworks and sector analysis, and planning. These activities increased the capacity to formulate projects in key sectors, and enabled ADB operations to pursue the design and early implementation of projects. ADB supported post-primary education analysis and policy dialogue within the government-led Comprehensive Education Sector Review (CESR). The original objectives of the interim CPS were largely achieved. ADB made progress in promoting an enabling economic environment. There were varying degrees of progress achieved in liberalizing licensing requirements for imports and exports, streamlining business registration requirements, establishing a public debt unit in the newly created Treasury Department, enacting a public debt law, issuing treasury bills, and modernizing the companies act. Some progress was made in reforming customs operations to facilitate cross-border trade. Infrastructure for access and connectivity was enhanced by reforming private sector provision in the power sector, and launching investment operations in power transmission, off-grid renewable energy, and road development. A new transport sector asset management system is in the early stage of implementation. Urban and water sector operations helped develop the capacity of local and regional government staff to plan, budget and prepare multisector urban development projects. Overall, progress was made with respect to sovereign operations, particularly through TA, but with the exception of the PBL no sovereign loan disbursements have been made. The three JFPR grants approved in included one focussing on health (HIV/AIDS prevention) and two addressing community-driven development (one each in rural and urban settings). All are in early stages of contracting and mobilization. These projects have been well received by the government, but design and capacity

10 Executive Summary xi challenges delayed implementation. The often lengthy government approval processes also contributed to the delays. Private sector operations were rapidly launched, and several transactions approved, but only the connectivity project has started disbursement. Further work is required to institute a sector focus for future private sector operations. Based on these findings, the validation rates the portfolio effective in contributing to the intended broad objectives of the interim CPS, while emphasizing the preliminary nature of the rating. Efficiency. The government was able to use the large, rapid-disbursement policy loan from ADB to support clearance of arrears, and signal its commitment to major economic policy reforms. Most of the sovereign and nonsovereign loan projects are still in the early stages of implementation and there are no project completion reports or validations available to provide estimates of actual economic internal rates of return. Both the sovereign project loans and the private sector operation s Yangon urban renewal loan have experienced delays and have not started disbursement. Inefficiencies are apparent for many TA projects that experienced delays or incomplete disbursements. In 2014, the completion dates of over half (54%) of ongoing TA projects had been extended. Government procedures were slow to adapt to ADB requirements, slowing planning and implementation of the TA, grants and loans that were approved. The importance of proper institutional mapping and capacity assessment is being recognized but so far efforts have been ad hoc and insufficient. Coordination gaps of ADB with other development partners and with government led to some misunderstandings and delays. The Enhancing Rural Livelihoods and Incomes grant project missed an opportunity to harmonize outputs with a much larger World Bank-financed project, creating additional compliance burdens for the government counterparts. ADB experienced difficulties securing suitable premises for the resident mission, which weakened on-the-ground supervision. The small staff complement and lack of sufficient procurement and sector specialists stands in contrast to broad, growing program. Management from ADB headquarters will become more difficult as the program grows. The validation rates the program less than efficient in the use of ADB and country resources during the interim CPS period. Sustainability. There is strong government ownership and commitment to ADBsupported reforms, sound sector plans and strategies, and steady improvement in recurrent costs and operations and maintenance practices in key sectors. Community and nongovernment organization (NGO) involvement in the three JFPR grant operations was designed to foster strong local ownership of the infrastructure and services provided. Support was provided to develop an asset management system for national roads. Once this is operational it will provide a clear overview of operation and maintenance needs and financing requirements. The CESR will identify cost-effective options, and should thereby help increase the sustainability of reforms. Support was provided for improved power sector financial management that helped provide power companies with a timely and consolidated picture of their financial status. Support was also provided for municipal planning that strengthened the links between municipal financing and recurrent cost requirements. Offsetting these findings, there is a concern that ADB lacks a coherent approach to understanding the institutional arrangements and capacity needs of counterpart agencies and intergovernmental systems. There is a need to prepare short- to medium-term strategies to speed project implementation, while building long-term capacity. The validation finds the interim CPS program outcomes likely sustainable.

11 xii Myanmar: Interim CPS Final Review Validation, Development impacts. Myanmar's macroeconomic situation improved significantly in recent years, due to the adoption of market-oriented policy reforms supported by ADB and its development partners. The clearing of arrears and provision of financing to Myanmar by ADB and its development partners has increased the country s ability to tap international sources of development finance. Strong government-led economic policy reform has improved investor confidence. Deregulation of trade licensing, supported by ADB, has allowed Myanmar's external trade to grow rapidly. Improvements in Myanmar's visa policy and hotel licensing regime, as recommended in the ADB-supported Tourism Master Plan, facilitated an upsurge in visitor arrivals. With ADB support, institutions have begun to plan and manage their operations in ways more consistent with a participatory, market-driven economy. Investments in connectivity are underway, and when finished will improve access to affordable and reliable power, transport, and related services. Myanmar will be better integrated into regional markets, boosting productivity and food security. More robust environmental impact assessments are being undertaken for investment projects, and it is likely this approach will also be adopted in other important areas (e.g., mining and forestry). The validation rates development impacts satisfactory. ADB performance. ADB s reengagement with the government focused on resolving outstanding issues, building trust, and developing a new program. It was able to learn from its actions by undertaking sector and institutional analysis and providing TA to build capacity, which underpinned the loans and grants that have been recently approved. However, some of the TA was provided in a supply driven fashion. ADB missed opportunities for harmonization (such as of institutional and capacity assessment studies) and alignment with government approaches (for example, with the rural community-driven approach of the Department of Rural Development). Nevertheless, ADB consulted with the government and Parliament, and generally collaborated well with other development partners. It actively sought out and engaged with civil society organizations. These operations are staff intensive, and ADB will need to establish a well-staffed resident mission that can support a growing portfolio to realise the projected development impacts. The validation finds ADB performance satisfactory. Borrower performance. Strong government ownership was an important factor underpinning the achievement of the ADB TA project outputs and outcomes. Government counterparts generally made good use of the TA to enhance their individual and organizational capacity. Numerous challenges remain, related to unclear government systems, willingness to accept new practices, and readiness to cope with differing development partner systems. The government showed commitment to making improvements with respect to these issues, and exhibited leadership when engaging with development partners in various coordinating forums. The validation finds borrower performance satisfactory. In conclusion, with the exception of efficiency, the validation confirms most of the self-assessments found in the CPSFR and derived a rating for the CPS of successful. Issues Effect of social and ethnic tensions on the achievement of inclusive growth. Political and social conflicts in Myanmar pose a significant risk to the sustainability of the reform process, hindering the achievement of inclusive growth. If external

12 Executive Summary xiii assistance is not well designed, it can exacerbate social and ethnic conflicts. ADB and other development partners recognize the need for conflict sensitivity in programming and have taken steps to access expertise in this area. ADB will need to ensure that efforts to integrate context-sensitive approaches into all ADB programs are carefully considered in the upcoming CPS to make sure its interventions do not cause harm. Vulnerability to shocks and capital outflow. Myanmar s increasing global integration exposes the economy to global trends and shocks. Its current account deficit is widening and international reserves held by the Central Bank of Myanmar cover only 2.75 months of prospective imports. Reliance on foreign direct investment is a sign of strength, but could become a vulnerability in times of stress. Political and social turmoil could undermine investor confidence, leading to a reduction in external financing. The International Monetary Fund is taking the lead in advising the government on these macroeconomic issues, but ADB can participate in a coordinated approach in monitoring the macro-economy. ADB could play a prominent role in helping to address these vulnerabilities and identifying ways of increasing resistance to possible shocks. Decentralized governance. Myanmar is moving toward decentralized governance, on two tracks: (i) politically, through state restructuring, which hinges on peace accords with regional groups; and (ii) administratively through expenditure reassignment at all levels of subnational government. The latter approach has the greatest impact on ADB operations, and a deeper understanding of the extent to which it is happening and the demands it will make on ADB s government partners and stakeholders is needed. ADB could facilitate further decentralization in the sectors it supports by helping to define a workable division of labor between national and subnational governments. In particular, ADB could help address issues such as the respective roles of deconcentrated units of the union, the regions and states, and the townships. Designs and implementation arrangements should take into account decentralization policies, and the need to enhance capacity and strengthen accountability relationships. ADB financing modality and allocations. The size of the ADB resource envelope for Myanmar is somewhat uncertain, due to the expected merger of the Asian Development Fund (ADF) with ADB ordinary capital resources (OCR) in 2017, and an expected decline of allocations to Myanmar, from $286 million in 2015 to $206 million in The ADB pipeline and dialogue with government indicate the portfolio should be increasing over the next CPS rather than contracting. As noted in the CPSFR, the anticipated ADF allocations do not respond to the increasing infrastructure investment requirements. The ADF allocations do not accord with the anticipated expansion into additional subsectors envisaged in the ADB sector assessments and recent operational business plans. ADB is anticipating that the ADF-OCR merger will help increase the financing levels available for lending to Myanmar. The Myanmar country team notes that in recent ADF discussions, the proposal of a special allocation of 40% more than the level for Myanmar has been positively received. It will be necessary to reconcile these various financing trends and policies in order to determine the resource envelope and concessionary terms that will be used to shape the new CPS. Capacity and governance assessments and capacity development support. ADB recognizes that weak government capacity and governance systems strongly affect program success. It has sought to understand how project success is impacted by the new institutional landscape, and relevant political and social dynamics. Challenges to ADB operations are becoming evident in the design and early stages of implementation, and will be apparent in subsequent stages of implementation, and in the monitoring and assessment of results. ADB now has an opportunity to update

13 xiv Myanmar: Interim CPS Final Review Validation, sector assessments to improve its understanding of the institutional arrangements and capacity vulnerabilities. TA could place more focus on the capacity of counterpart agencies, and more broadly, on the capacity of sector institutions. ADB could examine governance challenges that cut across sectors, and possibly call for TA and loans that target public sector management (PSM). ADB can work with other development partners to ensure a sufficient level of capacity assessment and support, and help the government to prepare a capacity development strategy. Sector reviews and results framework. During the preparation of the next CPS there is an opportunity to update and deepen sector assessments and related road maps. Attention could be paid to PSM (in addition to the private sector focus now contemplated). These activities will have additional value if the reviews are implemented in close cooperation with the relevant government units so as to help them define useful sector indicators; they can also help ADB to establish an appropriate results framework to track progress. Recommendations As ADB prepares the program for the next CPS it should give attention to the following recommendations of the validation: (i) Increase the amount and coherence of support for capacity development and more effectively harmonize strategies with development partners and align them with government systems and approaches. ADB efforts should include more overarching and comprehensive joint shared assessments and capacity development plans for its counterpart institutions. These documents should provide clear short- and long-term approaches for addressing identified capacity gaps. To reduce the management burden on government and ensure that the most robust models have broad support, funds should be pooled and implementation modalities harmonized among development partners, and with government systems. (ii) Anticipate and support decentralization in ADB priority sectors and address conflict sensitivities. ADB can align projects with government policies and build subnational government capacity in planning, budgeting, and project management. An assessment for decentralization (as a subsector of PSM) that can be used to guide ADB strategy in the next CPS will provide a valuable mechanism to identify opportunities and challenges. Political and social conflicts pose a significant risk to the sustainability of the reform process, and ADB should build on ongoing efforts and continue to carefully consider conflict sensitivity in the upcoming CPS, and in project designs. (iii) Continue to pursue inclusive growth objectives while prioritizing sectors and projects for operations. ADB TA has been very broadly spread, and ADB has approved or is preparing loan or grant operations in seven sectors (public sector management, energy, transport, urban and water, education, health, agriculture and rural development). Careful attention will be needed to ensure the program grows in areas of ADB strength and in line with inclusive growth priorities. While continuing to build on community driven development, education, and improving access and connectivity projects in power and transport sectors, incremental efforts are needed to incorporate project design elements to identify how the program will provide more equitable support within a sufficiently broad perspective of inclusive growth.

14 CHAPTER 1 Background 1. This report has been prepared by the Independent Evaluation Department (IED) of the Asian Development Bank (ADB). The report provides a validation of the ADB Country Partnership Strategy Final Review (CPSFR) for Myanmar for that was prepared by operations. 1 A. Purpose, Scope, and Methodology 2. The purpose of this validation is to provide an independent evaluation of the performance of ADB s program. This validation identifies lessons that will contribute to the development of ADB's next country partnership strategy (CPS) for Myanmar for The validation reviewed completed, active and newly approved loans, grants and technical assistance (TA) during the interim CPS period ( ). The validation employed the following evaluation criteria to assess the performance of ADB s program: (i) relevance, (ii) effectiveness, (iii) efficiency, (iv) sustainability, and (v) development impacts. The validation team used the recently updated IED guidelines to prepare the validation. 2 Because the program began only recently, very few projects have closed and have completion reports available. Consequently, the validation cannot provide a definitive assessment of outcomes and impacts for most projects. 4. The CPSFR validation was based on: (i) a desk review of relevant documents and reports such as the interim CPS and subsequent strategies and plans; 3 (ii) consultation with ADB staff, government agencies, development partners and the Myanmar Resident Mission (the Yangon and Nay Pyi Taw offices); and (iii) feedback from a stakeholder survey. 4 1 ADB Interim Country Partnership Strategy Final Review: Myanmar, Manila. 2 ADB Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila. 3 Chronologically, these subsequent strategies and plans are ADB Country Operations Business Plan: Myanmar, Manila; ADB Country Operations Business Plan: Myanmar, Manila; and the extension of the interim CPS to Only two questionnaires were returned, and thus the feedback has been taken into account without specifically analyzing the responses.

15 2 Myanmar: Interim CPS Final Review Validation, B. Country Context and Development Plans 1. Country Context 5. Myanmar serves as a gateway between East Asia, South Asia, and Southeast Asia. The country is rich in natural resources, including arable land, forests, minerals, natural gas, and freshwater and marine resources. In recent years, after a long period of economic isolation, Myanmar embarked on major economic, social, and political transformations, as reflected by the emerging democratic political system and an early stage market-based economy. 6. These reforms are showing positive results Myanmar s gross domestic product (GDP) is estimated to have grown by 8.3% in FY2013/14, driven mainly by construction, manufacturing, and services. This rapid growth can be explained in part by the low level of economic activity at the time of reengagement. Despite the remarkable changes seen in the last 5 years, Myanmar remains one of the world s poorest countries, with a per capita GDP of $1,105 in 2014, which is one of the lowest in East Asia and the Pacific Internal conflicts reignited in 2014, with clashes between the Myanmar national army and non-state groups in Kachin and northern Shan states, leading to displacement of civilians. 6 In mid-2015, efforts were made by the government to reach a comprehensive ceasefire, but the process is frustrated by difficulties in gaining agreement among a large number of groups. A national ceasefire agreement was signed by eight of the ethnic groups in October 2015, and efforts to establish a political dialogue continue. 8. To maintain the reform momentum and realize its development goals, Myanmar must address important governance challenges. The government has acknowledged several governance weaknesses, such as the difficulties many ministries experience with planning, budgeting, transparent procurement, implementation, accounting, and reporting. With development partner support, the government has undertaken several reviews, including assessments of public expenditure and financial accountability; some have been supported by ADB. 7 Myanmar had successful free and fair elections in November Potential challenges for development partners include identification of the priority areas to target support, resistance to linking support to conditions, and the need to gain unimpeded access to critical regions and target groups. 2. Country Development Plans 9. The government s strategic direction is defined in the Framework for Economic and Social Reforms (FESR) , which identifies both concrete short-term results and initiatives required to establish the foundation for sustainable and equitable longterm development. The FESR stresses economic reforms, human resource development and people centered-approaches, agricultural development, private sector development, and infrastructure. 5 World Bank estimates. 6 Office of the United Nations High Commissioner for Refugees (UNHCR) UNHCR country operations profile Myanmar. org/pages/49e4877d6.html 7 ADB Country Performance Assessment. Manila.

16 Background 3 C. ADB Country Strategies 10. ADB reentered Myanmar in 2012 after a long absence, and sought to reengage with government and stakeholders, establish full resident mission status, normalize the relationship with Myanmar through the clearing of arrears, and establish sufficient knowledge and capacity to prepare a full CPS. ADB aimed to build country capacity to support reforms and the design and implementation of projects. 11. In response to the wide-ranging reforms initiated by the government, ADB adopted a phased approach to reengagement with Myanmar. ADB initially undertook extensive analysis, culminating in indicative sector strategies for ADB support in energy, transport and post-primary education. This initial diagnostic work provided the basis for an interim CPS, that was endorsed by the ADB Board of Directors on 26 October This interim CPS was subsequently extended for (footnote 3). 12. After approval of the interim CPS, assessments and road maps were prepared for the urban and water, and agricultural, natural resources and environment sectors. ADB s program for Myanmar included high levels of TA and dialogue to support key reforms across a wide range of sectors. Umbrella TA allowed ADB to quickly respond to government demands, employing small projects that met important and urgent needs. Project preparatory TA was employed early in the interim CPS period and these initiatives began to translate into project loans in the third year of implementation of the interim CPS. D. Lessons and Issues Identified from Previous Country Evaluations 13. Previous evaluations of the Myanmar ADB program relate to the prior period of cooperation ( ), and are not relevant to the current situation. ADB maintained some connection to the government during the period of isolation through the Greater Mekong Subregion (GMS) program, but these were low-intensity engagements. 14. Myanmar now faces unique opportunities and challenges, many of which are outlined and addressed in this validation report. ADB has the benefit of past experience reengaging with other Asian nations undergoing political reforms (e.g., Cambodia, Lao People s Democratic Republic, and Viet Nam). E. ADB s Program and Portfolio Approved during the CPS Period 15. During the interim CPS period, ADB approved 34 TA projects with a value of about $37 million, which were financed by the ADB TA program, trust funds, and bilateral cofinancing. 8 The Japan Fund for Poverty Reduction (JFPR) provided $26 8 In Figure 1, the TA total of 36 includes the extension of the interim CPS through 30 September 2015.

17 4 Myanmar: Interim CPS Final Review Validation, million to implement three grant projects. 9 The TA helped develop institutional capacity within the government and prepare projects. 16. ADB approved $968.6 million in lending and nonlending operations during (Table 1). A large policy-based loan (PBL) implemented in 2013 and designated as public sector management (PSM) enabled the rescheduling of the government s arrears to ADB, and accounted for about 59% of approved lending during In addition, a $60 million energy sector loan was approved in 2013, and an $80 million transport sector loan in For sovereign operations, a concessionary medium-term Asian Development Fund (ADF) allocation for Myanmar in 2013 consisted of $286 million per year for , and $206 million in By 2014, ADB had approved $190 million in nonsovereign projects, which were financed on commercial terms using ordinary capital resources (OCR). Table 1: ADB Operations Approved ($ millions) Loans ,396.4 Sovereign ,246.4 Nonsovereign Equity Investments/Guarantees Nonsovereign Grants ADF JFPR Technical Assistance TASF JFPR Others Total ,510.3 ADF = Asian Development Fund, JFPR = Japan Fund for Poverty Reduction, TASF = Technical Assistance Special Fund. Source: Asian Development Bank Independent Evaluation Department. 17. Few of the ADB operations have closed, and only seven (six TA projects and one loan) have a self-assessment (Table 2). Five of these projects were rated successful, and two TA projects were rated highly successful. IED has not yet validated or evaluated any operation in Myanmar. In reviewing this program, the validation considered the use of TA to support capacity building and institutional strengthening for management of development, as this was the primary focus of ADB s program during JFPR grant cofinancing for the following: Enhancing Rural Livelihood and Incomes Project in 2013, the Greater Mekong Subregion Capacity Building for HIV/AIDs Prevention Project in 2013, and the Pro-Poor Community Infrastructure and Basic Services Project in 2014.

18 Background 5 Table 2: Self-Assessment Rated Operations Loan or TA No. Project Name Sector a Category Date approved Closing date Amount ($ million) Rating 8113 Support for Trade Policy Development 8114 Support for Improving the Business Climate 8136 Myanmar Tourism Master Plan 8156 Improving Fiscal Revenue Mobilization 8190 Trade Facilitation Support for ASEAN Economic Community Blueprint Implementation 8216 Financial Management Assessment of Energy Sector 2984 Support for Myanmar s Reforms for Inclusive Growth Program PSM SSTA 16 July 2012 PSM SSTA 16 July 2012 I&T SSTA 5 July 2012 PSM SSTA 16 Aug 2012 I&T SSTA 8 Oct March May Sept March March HS S HS S S EN SSTA 19 Nov Apr S PSM Program 14 Jan S Loan 2013 March 2013 ASEAN = Association of Southeast Asian Nations, EN = Energy, HS = highly successful, I&T = information and technology, PSM = public sector management, S = successful, SSTA = small-scale technical assistance. a Sector designation derived from the project information sheet. Source: Asian Development Bank Independent Evaluation Department.

19 CHAPTER 2 Assessment of the Country Partnership Strategy Performance 18. This chapter provides an assessment of the interim country partnership strategy. Summary of the overall assessment is described in Table 3. A. Relevance 19. The CPSFR followed the previous IED guidelines and differentiated between strategic positioning and relevance, whereas the 2015 guidelines treat both these dimensions under a single heading of relevance. 10 An aggregate of the final review s findings for strategic positioning and relevance would derive a rating for the interim CPS of relevant. 20. Reengagement objectives and strategic positioning. ADB anticipated the challenge of reengagement, recognizing it would require a program to reconcile outstanding issues (arrears) and provide a basis to become familiar with the changed development context and institutional landscape of Myanmar. In this respect, the most important part of ADB s strategic positioning was the need to design and implement a sound reengagement strategy. 21. The government's FESR was in draft stage when the interim CPS was prepared. Key objectives in the FESR included: (i) achieving full economic integration with the Association of Southeast Asian Nations (ASEAN), in accordance with its ASEAN Economic Community 2015 schedules; (ii) realizing the millennium development goals and other human development objectives by 2015; and (iii) moving beyond least-developed-country status and transitioning to a knowledge-based economy. The government set goals for: (i) average annual GDP growth of 7.7%; (ii) growth of the industrial share of GDP from 26% to 32%, together with an increase in the services sector to reduce the current high share of agriculture; and (iii) growth in 10 Previous ADB validations undertook separate assessments and ratings of strategic positioning and relevance (each with a weight of 10%), these criteria have now been combined in a new relevance assessment, as outlined in the 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations with an equivalent 20% weighting.

20 Assessment of the Country Partnership Strategy Performance 7 per capita GDP of 30% 40% from the base year of 2010 to help reduce the poverty incidence by 50% over Reflecting the focus of the Myanmar government on reforms, ADB emphasized projects that would remove program impediments and implement activities that would support a productive future relationship. ADB developed an interim CPS to support the government in clearing its arrears, mobilizing an ADF financial allocation, and securing a host country agreement. In support of Myanmar s reform and development needs, ADB sought to (i) build human resources and capacity, (ii) promote an enabling economic environment, and (iii) increase access and connectivity, while emphasizing the themes of good governance, environmental sustainability, private sector development, regional cooperation and integration, and gender. ADB s program was in line with its corporate priorities under Strategy ADB grouped its sovereign program into three phases: (i) the first prepared initial economic and sector analyses for energy, transport and education that fed into the interim CPS; 13 (ii) in the second phase, additional comprehensive sector assessments and road maps were prepared for the urban and agricultural sectors, and capacity development was provided across many sectors; 14 and (iii) the final phase involved resumption of lending, focussing on energy and transport. This systematic approach entailed extensive consultation and country and sector diagnostics, and enabled ADB to address important development constraints facing Myanmar. 24. Programs were coordinated with the activities of other development partners. For example, in the energy sector ADB produced the Energy Master Plan, JICA the National Electricity Plan, and the World Bank the National Electrification Plan. ADB also cooperated in the government-led and multi-donor supported Comprehensive Education Sector Review. Coordination with development partners occurred through a combination of ad hoc initiatives and formal sector working groups. As a result, ADB succeeded in arranging cofinancing and agreeing on divisions of labor. ADB is a member of several government-led sector working groups called for in the Nay Pyi Taw Accord for Effective Development Cooperation. 15 In association with the government, JICA, the World Bank, and ADB participated in the first Joint Country Portfolio Review in mid Most development partners participated in several sectors, leading to most sectors having several active development partners. Many development partners provided support for education (including ADB, the World Bank, United Nations Educational, Scientific and Cultural Organization, Department of Foreign Affairs and 11 ADB Myanmar: Unlocking the Potential Country Diagnostic Study. Manila. 12 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank Manila. 13 ADB Initial Assessment of Post-Primary Education (PPE) in Myanmar: Discussion Paper. Manila; ADB Myanmar: Energy Sector Initial Assessment. Manila; ADB Myanmar: Transport Sector Initial Assessment. Manila. 14 ADB Myanmar Agriculture, Natural Resources, and Environment Initial Sector Assessment, Strategy, and Road Map. Manila; ADB Myanmar Urban Development and Water Sector Assessment, Strategy, and Road Map. Manila. 15 The Nay Pyi Taw Accord for Effective Development Cooperation was presented to development partners by the minister of National Planning and Economic Development and approved by acclamation at the First Myanmar Development Cooperation Forum, Nay Pyi Taw, 20 January ADB participates in sector forums focusing on: agriculture and rural development, communications/it, education, employment, environment, gender, hotel and tourism, public administration, public finance management, statistics, and transportation (see World Bank Myanmar: Empowering People for Inclusive Growth. Myanmar Country Partnership Framework Washington, D.C., p.51).

21 8 Myanmar: Interim CPS Final Review Validation, Trade, and JICA). Several development partners worked in the energy sector, with lead support provided by the World Bank, ADB, and JICA. The World Bank had a greater presence in the health sector than ADB, providing substantial funding to the government to deliver universal health care to citizens. ADB pursued a more targeted approach, geographically and in terms of disease control (GMS Capacity Building for HIV/AIDS Prevention). With regard to transport, ADB s initial focus was the improvement of the primary road network. JICA focused on the preparation the Myanmar s National Transport Master Plan and the Project for Comprehensive Urban Transport Plan of the Greater Yangon. It followed up with a loan to improve a circular railway line to reduce the traffic volume in Yangon. Though not a primary focus, the World Bank supported roads as one of many activities in its rural community-driven development project. 26. ADB worked closely with civil society organizations (CSOs) to design and implement programs in a coordinated manner. ADB engaged civil society by providing TA to Strengthen Civil Society Participation in ADB-Financed Operations, which supported inclusive growth in all its projects. This project began in 2013 and was completed in December The project prepared a stakeholder map of civil society participants in Myanmar, and developed good practice consultation guidelines and a consultation and participation plan for ADB. Similarly, ADB provided TA to maximize transport-related benefits through community engagement. 27. Human resources and capacity. ADB supported development of human resources and capacity through TA grants to selected government ministries in about 20 subsectors to help them manage the reform process by developing policy frameworks and institutional capacity. 28. Enabling economic environment. ADB provided a large policy-based loan, 16 extensive policy advisory TA, and support for tourism development. This program was complemented with support to develop the policy and institutional framework for public-private partnerships, a regional business support initiative, and create a basis for ADB to pursue private sector operations. 29. Access and connectivity. ADB provided capacity building, regulatory, and investment support in the power, transport, agriculture, regional development, and urban and rural sectors. Special emphasis was accorded to Myanmar's participation in subregional cooperation activities, including an integrated corridor development for completion of the final 70-kilometer segment of the GMS East-West Economic Corridor in Myanmar's Kayin state. 30. Thematic support. Support was provided for gender equality, primarily to prepare gender situation analysis and encourage key stakeholders to use the findings in these studies. 17 Support was provided in the application of environmental and social safeguards. 18 For governance, support was provided in many areas, with 11 of the 40 TA projects designated as PSM (Figure 1). Diagnostic work on the country performance 16 ADB Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Loan to the Republic of the Union of Myanmar for Support for Myanmar s Reforms for Inclusive Growth Program. Manila. 17 ADB Technical Assistance to Myanmar for the Support to the Preparation and Dissemination of the Myanmar Gender Situational Analysis. Manila. 18 ADB Technical Assistance to Myanmar for the Environmental Safeguard Institutional Strengthening. Manila.

22 Assessment of the Country Partnership Strategy Performance 9 assessment (CPA) focused on governance issues, and approved loan projects were prepared with risk analysis that followed ADB guidelines Planned portfolio allocations. The interim CPS did not set out a portfolio envelope or sector allocations for The county operations business plan (COBP) (footnote 3) was the first operational document produced but lacks sectoral allocations covering the interim CPS period. It was therefore not possible to assess the interim CPS against the core sector Strategy 2020 commitments or the consistency of its implementation against the planned program. In view of ADB s low level of familiarity with the Myanmar economy and institutional landscape in 2012, this shortcoming is understandable, but it did create monitoring difficulties for the country strategy. 32. Results monitoring framework. The interim CPS entailed significant design risk as it was not accompanied by an operational business plan or a results framework, and it was not clear how the program would be monitored. The sector assessments conducted in 2012 and 2013 did have some indicators and/or targets, but these were not referred to in the CPSFR. While the interim CPS approach to performance tracking was supported with waivers from management, an indication should have been given as to how success would be defined and implementation monitored. In particular, the strong emphasis on capacity development could have been accompanied by cross-ta indicators that might have provided ADB with evidence of achievements. Results frameworks at country and sector levels were included in the COBP , but the baselines and outcome targets were not defined, making it impossible to monitor and assess performance. ADB intends to accompany the CPS with a results framework that reflects the most recent advances in ADB s approach to monitoring program performance Actual portfolio allocation. ADB s program was very broad initially (Figure 1), and this ad hoc approach resulted in more TA projects than initially foreseen. 21 Over time the program gained focus (e.g., in the COBP), as key challenges were identified that lent themselves to ADB support in transport, energy, and private sector development. For example, the rapid growth in electricity use (about 13% annually) threatened to outstrip generation and transmission capabilities. The low quality of roads restricted the growing levels of commerce. ADB financed investments in these sectors as they reflected strategic priorities of the government and ADB. 19 The policy requires analysis and mitigation plans addressing identified project impinging risks, i.e., risk assessment and risk management plans. ADB Second Governance and Anticorruption Action Plan. Manila. 20 Consultation meeting with the validation team in the resident mission, September 23, 2015, Nay Pyi Taw. 21 Footnote 1.

23 10 Myanmar: Interim CPS Final Review Validation, Figure 1: Number of ADB Projects by Sector in Myanmar (as of 25 September 2015) a TA Loans Grants Loans under negotiation E d ucation 4 0 H ealth 1 F i nance 4 PSM 11 1 I &T and ICT 3 T r ansport E nergy 9 1 U r b an/water ANR a Sector assigned is the dominant sector Source: ADB data. 34. Policy advisory and capacity development TA and grant support was provided across a wide range of sectors and subsectors, including: energy, power, transport, information and communication technology, tourism, irrigation, urban development and municipal infrastructure, education, finance, statistics, public financial management, and private sector development (Figure 1). The program included thematic initiatives to pursue policy objectives in areas such as trade and investment, trade facilitation, environmental and social safeguards, community and civil society participation, and disaster risk mitigation. The actual sovereign loan portfolio comprised the $575.5 million PBL in 2013, a $60 million energy project in 2013, and an $80 million road project approved in Excluding the PBL and private sector operations, the sector shares for the portfolio for the interim CPS period were: transport 41%, energy 34%, social development 14%, finance and PSM 6%, and urban development and water supply 5%. 35. Overall, both the planned and actual CPS program were aligned with the objectives of the government and ADB, and this validation rates the country program relevant. B. Effectiveness 36. The CPSFR assessment of effectiveness referred to the expected outcomes of the interim CPS, but in practice it lacked a results framework, and the discussion centered on the reengagement and broad development objectives presented in the interim CPS. Accomplishments highlighted by the CPSFR included the approval of the program loan, two project loans in energy and transport, three grants, two nonsovereign operations, and the large TA portfolio. This program helped deepen ADB's knowledge and understanding of country conditions through analytic work; the building of trust and working relationships with numerous government agencies; and work to strengthen institutional arrangements, legal frameworks and sector analysis and planning. The preparatory work for sovereign and nonsovereign lending operations